US Meltdown for dummies

Disclaimer : The matter contained in first part of this blog is purely fictional and i do not mean to offend any economics-lover! apologies to VJ Sebastian, our economics professor.

US Meltdown? Confused?

As Ozone layer on top of US is rupturing caused by various profligate-ory activities practiced by US, temperature is rising and all the matter present in solid state is turning into liquid state... 

But why the hell is India worried. It is because of melting down of US, there will be rise in sea level and coastal regions of India are in danger of getting wiped out... and that is why people in south Mumbai (Nariman point, etc), Chennai,etc. are in danger... 

(Surprised?! or, pissed off?! .. whatever, must read ahead... )

Well, that was a mixture of information overload that has happened in my mind because of 'Physics' I studied in school, ubiquitous 'Global warming' issue and of course, being an MBA student, 'Obligatory reading of Economic Times'...  

Well, on the other hand, if you see a positive side of it, the final conclusion was not too far from reality too...

Nariman point being financial centre of financial capital of India, is in danger because of US (economy) meltdown.. 

The derivation I gave would have led to suicide of Adam Smith*, had he been alive... Though my derivation would surely make the likes of Galileos**, Al gores (and RK Pachauris), etc. proud... so I expect Galileo's spirit to act as my guardian angel from the potential wraths of Adam Smith's...

Now, if any of your explanation of 'Effect on India of US Meltdown' was anywhere close to the line of reasoning given above, you seriously need to read ahead (it will give you at least some hope)

Ok, now to give some solace to Adam Smith, US meltdown actually means US economy screwed up and this time around it is primarily triggered by Sub-Prime crisis. Sub prime crisis is due to  lending of too much of money to people who are Lukkhas***. Lukkhas bought houses with that money (say, for 10k $), then after spending some time in bought house and paying EMIs for the same time (say 1k $ in total), they showed their back to lenders when it came to giving back the money!, and ready to let go their house! Why? 

There could be various reasons behind it. One could be that the market prices of house fell (say, to 7k $) below the total amount of EMIs left to pay (i.e 10k-1k = 9k $).

Second reason could be that 'they were just bored of staying at one place'.

So, banks were left with the house, recovered from lukkhas, with market price way below the amount left to be repaid by lukkhas. The problem was aggravated to heights because the number of lukkhas in USA is an astronomical figure. And hence, the Crisis (read Catastrophe, if you are Finance guy).

Hope I took you out of the hopeless situation.   

* Adam Smith is the father of modern economics

** Galileo is the father of physics.

*** Lukkha is an Indian slang used for sub prime borrowers. Sub prime borrowers simply mean borrowers who are renowned for being... well, Lukkhas (perpetually kangaal, when it comes to returning someone's money) :D